Lucasfilm deal tightens ties between Hollywood and Bay Area

Home to cutting-edge documentary filmmakers, screenwriters, and the likes of director Francis Ford Coppola and actor Sean Penn, the Bay Area has long been something of a distant cousin of Tinseltown.

It has served as the backdrop for such film classics as "Bullitt" and "Vertigo," as well as more recent fare like Woody Allen's upcoming movie.

And it has been a source of film innovation. Emeryville-based Pixar, guided by late Apple co-founder Steve Jobs, helped revolutionize digital animation. Lucasfilm, especially in its epic "Star Wars" franchise, has been a pioneer in digital special effects.

But with Wednesday's announcement that Disney will buy Lucasfilm for $4.05 billion, the ties between Hollywood and the Bay Area have been cinched tighter. As new technologies reshape the entertainment landscape, the Bay Area -- and specifically Silicon Valley -- is emerging as a major force in the future of filmmaking.

"I do think there is something that is happening under the surface in Silicon Valley that is very exciting," said Jim Breyer, a partner at Accel Partners who personally invested in Marvel Entertainment, acquired by Disney in 2009 for $4.3 billion.

He added that leading movie and television executives in Hollywood and New York, while worried about how Silicon Valley technology is upending their businesses, are also keenly aware of how that same technology can help them make better movies and attract bigger audiences.

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It wasn't long ago that a war of words existed between Hollywood and the Bay Area. Silicon Valley was considered the land of content thieves, with sites like YouTube allowing pirated videos to be uploaded. The valley believed Hollywood was filled with Luddites who refused to recognize the digital revolution.

Silicon Valley and Hollywood approach change differently -- tech entrepreneurs race to upend old ways of doing things while studio executives worry about losing control of a successful business model, said Breyer, who is also a board member of News Corp. and Legendary Pictures, in which he is a lead investor.

Large entertainment companies embrace risk "much more slowly in an order of magnitude than highly successful Silicon Valley companies," he said. "At the same time, there is great experimentation occurring in some media companies" around using social and mobile technology.

As representatives of technology companies and studios struggle to find solutions to piracy that are acceptable to both sides, Hollywood and Silicon Valley are moving closer together.

"You have a new generation of up-and-coming Hollywood leaders who were steeped in digital technology as teenagers and don't view it as alien," said Silicon Valley futurist Paul Saffo.

Google, for instance, has deals with all the major studios. YouTube, which has more than 800 million monthly users around the globe, last year launched television-like programming oriented around "channels" that has attracted videos from cutting-edge entertainment companies as well as venerable ones, such as Warner Bros., Paramount and Disney.

Yahoo, once led by former Warner Bros. head Terry Semel, last month announced a deal with CBS Television Distribution to create an online entertainment news series based on The Insider newsmagazine that will be renamed "omg! Insider" beginning in January.

Apple, a leader in legal distribution of music and entertainment videos, is expected to continue to cut new deals with Hollywood, perhaps with a launch of an iTV, which some analysts say could happen as early as next year. Its iPhones and iPad tablets, meanwhile, have created new platforms for entertainment companies, many of whom, such as ESPN, now sell content to consumers through apps. Robert Iger, the CEO and chairman of Disney, which acquired Pixar in 2006 for $7.4 billion, sits on Apple's board of directors.

In coming months, Legendary Pictures is planning to open up a Silicon Valley office for as many as 12 product developers and engineers focusing on the intersection of entertainment and mobile and social network technology, Breyer said. DreamWorks Animation already has a studio in Redwood City.

Nonetheless, tensions still exist between the two regions, particularly around the issue of how to best combat piracy. Hollywood views overseas piracy sites as a major threat to its future and has aggressively pursued tough new laws. But Internet companies have so far successfully resisted their legislative proposals, which have included new powers for copyright holders to pursue companies hosting pirated content by cutting off their advertising or payments revenue.

Former Connecticut Democratic Sen. Chris Dodd, now chairman and CEO of the Motion Picture Association of America, said the solution will come from new technology and business models, not legislation.

"It's not like they are competing countries," he said of the two regions. "They are absolutely essential to each other."

Tom McInerney, an angel investor in media technology companies who splits his time between Santa Monica and San Francisco, said the ties between Hollywood and Silicon Valley will inevitably deepen. He envisions the day a major studio acquires a valley Internet company.

"It has to happen," said McInerney, who cofounded the now defunct San Francisco-based video-sharing site Guba.com. "It's going to be interesting to see who does it."